Five years after Daiichi buyout, fresh doubts loom over Ranbaxy | business | Hindustan Times
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Five years after Daiichi buyout, fresh doubts loom over Ranbaxy

business Updated: Sep 30, 2013 03:27 IST
Gaurav Choudhury
Gaurav Choudhury
Hindustan Times
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Repeated run-ins with global drug watchdogs could be just one among many festering wounds that Ranbaxy Laboratories — Indian pharmaceutical industry’s one-time poster boy — is struggling to heal.

The company has issued pink-slips to more than 400 employees in the last two months, and sources said lay-off notices were being readied for a similar number of people who are likely to be asked to leave the firm in the next three months.

The company, sources said, plans to bring down its employee strength by about 10% from its current base of 14,600 employees over the next 12 months.

There are also murmurs of a possible difference between the top management of the company’s India operations and those of Daiichi Sankyo, the Japanese parents of the drug firm.

Ranbaxy chairman Tsutomu Une was unexpectedly removed from the Board of Daiichi Sankyo in May, days before the company agreed to pay $500 million (about Rs 2,750 crore) as penalty for selling adulterated medicines in the US and lying about it to authorities.

Ranbaxy CEO and managing director Arun Sawhney did not respond to HT’s questions for this story.

Earlier this month, the US drug regulator, US Food and Drug Administration (USFDA), blacklisted Ranbaxy Laboratories’ Mohali plant—the company’s third factory to face such an import ban — effectively stopping shipments of 11 medicines, including the generic version of blood-pressure drug Diovan, produced in the plant.

This has raised questions about the violation of hygiene and manufacturing norms even by Daiichi Sankyo, although In May, it had blamed the company’s former Indian owners for concealing and misrepresenting critical information about US investigation into the sale of adulterated drugs, and said it will pursue legal remedies.

“It has now been over 5 years since we exited Ranbaxy as promoter family. We are not involved in the affairs of the company and we would not like to make any comment,” Malvinder Mohan Singh, executive chairman of Fortis Healthcare, and former promoter of Ranbaxy, told HT.

The Mohali plant was commissioned in 2011, three years after the Japanese drug maker bought Ranbaxy for an eye-popping $4.6 billion (about `20,000 crore then).

Analysts said the Mohali plant, billed by the new management as a panacea for Ranbaxy’s ills with the state-of-the-art facility, accounts for more than half of the 36 abbreviated new drug applications (ANDAs) that Ranbaxy has filed with the USFDA over the past three years.

The filings from its US facility in Ohm and Mohali total around $6 billion of current brand value and these new facilities were expected to contribute more than 75% to the firm’s business.

Ranbaxy’s version of Diovan, for which it earned 180-day exclusivity rights in the US, was due for launch in September 2012, but its introduction has been delayed.

There is speculation that a generic Diovan would directly compete with Daiichi’s Benicar, its largest-selling drug that had $2.44 billion sales in 2012, whose patent expires in October 2016.

Questions are also being raised about why Ranbaxy did not inform stock exchanges about an USFDA inspection in the Mohali plant in September 2012.

“The company was issued Form 483 for Mohali in 2012. This means there were manufacturing practices that the USFDA had already pointed out ... and the company had time to comply, which it failed to,” said Sarabjit Kour Nangra, of Angel Broking.

In 2008, the USFDA banned 30 generics produced by Ranbaxy at its Dewas and Paonta Sahib units for gross violation of manufacturing norms. The company had admitted to improprieties.

There have been murmurs of discontent among a section of employees over discriminatory human resource practices.

“Due to the lack of import alert specifics from the USFDA, it is difficult to ascertain the seriousness of the issue of application integrity,” Vivek Kumar, analyst at SBI Cap Securities said in a research note.